Generally, stocks such as Ruchi Soya (NS: RCSY ) does not come on investors’ radar as the stock is highly volatile and less liquid. At the start of the year, the stock registered a 20-day average volume of a mere 12.98K shares which makes investors steer clear of such stocks.
However, recently, Ruchi Soya shares have seen a sudden spike in trading activity after the company announced to buy Patanjali’s food retail business for a bargain of INR 690 crore. Investors’ joy amid the acquisition news is evident in the company’s share price as well.
Image Description: Daily chart of Ruchi Soya with volume bars at the bottom
Image Source: Investing.com
The share price of Ruchi Soya has surged by over 23% in the last five trading sessions, to the last traded price of INR 1,223.1 (as of 12:20 PM IST, 20 May 2022). Increased investors’ participation can also be witnessed by looking at the volume spikes on the above chart. To put it in perspective, the 20-day average volume has bolstered to 8.2 million shares per day, that’s a whopping 6,300% increase in the average volume since the beginning of the year.
Price action is also looking strong on the charts with the stock moving rapidly towards its 52-week high of INR 1,376.7, marked in June last year. Although there has been a visible trend on the upside, it would not be easy for investors to ride through the heightened volatility.
Image Description: Daily chart of Ruchi Soya with ATR at the bottom
Image Source: Investing.com
A surge in volatility, especially after the Ukraine-Russia war has made it increasingly difficult for investors to hold on to their holdings. To gauge the current volatility of the stock, let us have a quick look at the Average True Range or simple, ATR (daily, 14). ATR on the daily chart is showing a reading of around 81, which is around the highest in the last few years. In other words, a value of 81 means that the stock has moved INR 81 per day (on average) for the last 14 days. That’s about 6.6% of the current market price.
If the stock closes around the current level today, it will be the highest weekly close on the charts since June 2021, which in itself is a very strong bullish indicator. Although a 13% rally required to reach its 52-week high might not seem much of a big deal, especially when the stock is in strong momentum, high volatility might become a hindrance. Therefore, before making an investment decision, investors must be prepared to tackle volatility in the stock.
Add Chart to Comment
We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:
- Enrich the conversation
- Stay focused and on track. Only post material that’s relevant to the topic being discussed.
- Be respectful. Even negative opinions can be framed positively and diplomatically.
- Use standard writing style. Include punctuation and upper and lower cases.
- NOTE: Spam and/or promotional messages and links within a comment will be removed
- Avoid profanity, slander or personal attacks directed at an author or another user.
- Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
- Only English comments will be allowed.
Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.